Gift / Inheritance Tax

gift and inheritance tax The current rate of Gift/Inheritance Tax is 33% (from 6 December 2012)

Typical examples of gifts include the following:

  • a present of cash
  • a present of jewellery or of a car
  • a transfer of a house or lands
  • a transfer of stocks and shares
  • the use of a house for life

How much of a Gift is Tax Free?

There are three tax-free thresholds. Each threshold depends on the relationship between the person receiving the gift and the person making the gift. The current group thresholds for 2012 below apply to the recipient of the gift/inheritance.

Class A Class B Class C
Relationship other
than A or B
6 Dec 2012 + €225,000 €30,150 €15,075

*In certain circumstances a parent taking an inheritance from a child can qualify for Group A threshold.

Exemptions from Gift Tax ?

The main exemptions are –

  • the first €3,000 of all gifts taken by a donee from one disponer in any calendar year.
  • a gift between spouses if taken after 30 January, 1990
  • a gift of a dwelling-house taken on or after 1 December, 1999 provided certain conditions are fulfilled.
  • payments for support, maintenance and education of members of the family which are part of normal expenditure
  • lottery and similar winnings
  • gifts for public or charitable purposes.

Pictures, prints, books or other items which are of national scientific or artistic interest are exempt from gift tax provided certain conditions are fulfilled.

For more substantial assets the availability of

  • Business relief – transfer of businesses, business property etc
  • Agricultural relief on the transfer of farms, farmland, farm assets etc
  • Favourite nephew/niece reliefs
  • Capital Gains Tax/CAT Offset:

Subject to conditions being met the value of assets are reduced by 90% and gift/inheritance tax is applied on the balance in excess of the Class A, B or C thresholds.

Problem Areas Gift/Inheritance Tax

  • If you gift an asset/cash etc to an individual and within 3 years they gift that asset to another individual, the last beneficiary is deemed to receive that gift from the original disponer. E.G. A parent gifts €200,000 cash to their son (nil liability as gift is within the Class A threshold). Within 3 years he gifts €50,000 to his wife. This €50,000 gift is not an exempt gift between spouses, the wife is instead deemed to receive the €50,000 from her in-laws and only has the stranger threshold and small gift exemption to offset before paying gift tax @ 33% on the balance.
  • Ensure you make all claims for reliefs. Even if there’s no tax liability due to business relief, dwelling relief etc complete the gift/inheritance tax return. If you do not claim the relief and years later have another gift/inheritance from the same threshold you may have to aggregate the full value of the initial asset gifted/inherited. While this was exempt or reduced to 90% of its value at the time, if the claim was not made you may have to include the full value of the asset.
  • Pay the tax liabilty on time. Interest accrues from the date of gift/inheritance not the date the return was due. Therefore even by filing 1 week late, could results in paying months of interest.

Please do not hesitate to contact us if you wish advice on the above or require advice on distributing your estate and/or structuring your will.